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    Why automobile companies are betting big on the festive season

    Why automobile companies are betting big on the festive season

    Why automobile companies are betting big on the festive season
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    By Parikshit Luthra   IST (Updated)

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    Car dealers and industry sources admit that high fuel prices definitely kept the customers away in September and if the crude prices continue to rise that could affect festive sales and the outlook for the next six months.

    India’s top carmakers have their fingers crossed this festive season. Especially after a dull September which witnessed a drop in retail sales. Dealers across the country would have anything between 45-60 days of inventory due to low sales last month, industry sources told CNBC TV18. Higher stock levels have in turn led to a drop in sale and production of passenger cars.
    According to the Society of Indian Automobile Manufacturers (SIAM), passenger car segment witnessed a 5.6 percent drop in sale and a 3.48 percent drop in production compared to the same period last year. Retail sales were low for scooters as well with the sale numbers showing a drop of 0.33 percent, sources said.
    Car dealers and industry sources admit that high fuel prices definitely kept the customers away in September and if the crude prices continue to rise that could affect festive sales and the outlook for the next six months.
    Rupee depreciation and volatility in the markets has also made the customer cautious. Drop in two-wheeler sales according to a few sources was also because of the increased cost of insurance after the Insurance Regulatory and Development Authority (IRDA) mandated five-year third party insurance and increased compulsory personal accident cover from Rs 50 to Rs 750 per annum.
    The recent clarification from IRDA is likely to bring relief to two-wheeler manufacturers this month. Ideally, Onam should have been the start of the festive season for car makers but heavy floods ravaged Kerala, one of the bigger car markets.
    Industry estimates suggest that 10-15 days of stock is an ideal situation for a car dealer and if due to poor sales the stock piles up that can lead to losses.
    “While it is obvious that inventories have piled up, it is quite usual for car dealers to stock up on cars in anticipation of a good festive season when demand is high," Rajan Wadhera, president, SIAM, told CNBC TV18.
    Some car makers have also told CNBC TV18 that the first few days of Navratri have been encouraging so far.
    Sources also say that retail sales this year cannot be compared to the last financial year when sales peaked post the roll-out of Goods and Services Act which led to a drop in car prices.
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